Xstrata in merger talks with Anglo American

It is not known if Anglo American has made a formal response.

Investment banks Goldman Sachs and UBS are believed to be advising Anglo,while Xstrata is being advised by Deutsche Bank and JP Morgan Cazenove.

The activities of the two companies overlap in many areas. Both own coal assets in Australia and South Africa,which suggests a merged group could make big cost savings.

There could also be potential savings across their copper mining operations.

Japanese investment bank Nomura has estimated a potential merger could achieve cost savings of 700 million dollars a year,the Sunday Telegraph said in its report.